Where are the Customer’s Yachts?

Book Title: Where are the Customer’s Yachts?
Author(s): Fred Schwed Jr.
Rating: $$$
Comment: A humorous (very funny) account of Wall Street and its deeds



Author’s Bio (from the book’s jacket or elsewhere):
Fred Schwed Jr. was a professional trader who got out of the market after losing a bundle in the 1929 stock market crash. Years later, he published a bestselling children’s book entitled “Wacky, the Small Boy”, and then went on to write “Where are the Customer’s Yachts?”

Review:
Ever wondered what misfortune makes out of a man – a wonderful writer with an exceptionally great sense of humor – atleast in the case of Fred Schwed Jr., the author of this book. As the title of the book suggests, “Where are the Customer’s Yachts?” is a satirical take on Wall Street and its inhabitants for amassing fortunes at the cost of not so fortunate customers. Though the book is not period or event(s) specific (one reason why it still holds water and helps the reader identify with the existing times), it primarily relates to 1920s and 30s as the first edition of the book went into publication in 1940 and the author got associated with Wall Street in early 1920s

Do not look for any great insights or wisdom here, a good hearty is laugh is all that you will get. I am not suggesting that there are no lessons to be learnt, but the scope of the message is limited to a mere caveat emptor for ordinary investors. Nonetheless, there are few observations so profound that it makes me wonder why Nobel laureate economists (of the “efficient market” school) never get it. Consider this:

“Let us consider what would happen if on some miraculous dawn the entire investing public woke up to find itself “completely informed.” That would certainly be the end of an orderly market, for a panic, either bull or bear, would ensue. Everybody would know whether to buy or sell, and whichever it was, everybody would try to do the same thing at once. And there would be no one to complete the other side of the trade! Orderly markets, like horse races, exist on difference of opinion.”

What makes the book a darling is its funny quotient. To give an illustration of the author’s prowess in humor, consider the following paragraphs from the chapter “Puts, Calls, Straddles, and Gabble”

“When the option trader is not engaged in the gabble-gabble of trading on the telephones, he is out getting customers. This means pointing out to possible buyers of options that they are splendid things to buy and pointing out to possible sellers that they are a splendid thing to sell. I have even heard them, when they are excited (and excitement is the normal state of mind of an option broker even when he his home eating his supper) present both viewpoints in the same session. They believe implicitly in this paradox, which is the backbone of their business. Thus the buyer does well, the seller does well, and it is not necessary to stress the point that the broker does well enough.”

“Many examples can be cited showing all three of them emerging from their adventures with a profit. One wonders why the problem of unemployment cannot be solved by having the unemployed buy and sell each other options, instead of mooning around on those park benches.”

There are other very interesting anecdotes and jokes in the book and will delight the reader every now and then. Infact the popular “coin flipping” argument that Buffett presented was borrowed from this book only (I am not suggesting that the author is the original conceiver of the idea)

What a pity, the book remains largely popular with the investment professionals, not investors.